Lesson 17: Business Plan Analysis

Objectives Explain the importance of preparing a business plan Describe the main components of an effective business plan and the information contained in each section Explain the purpose of financial reports within a business plan Identify characteristics of a professional business plan and resources that may assist you in preparing one Compute personal net worth and business equity in terms of assets and liabilities Forecast revenue, calculate net sales, and determine net profit using industry averages Review a business plan, identify potential problems, and make necessary changes

What is a Business Plan? A document that details a plan for the creation of a business Covers all aspects of the proposed business

Why Prepare a Business Plan? Requires research, time, and THOUGHT Often referred to as a business blueprint Not something that can be Google’d Benefits to writing a business plan Helps set and clarify your goals Helps determine the steps to accomplish goals Details how much money is needed for start-up Helps you secure finances

Developing a Business Plan Keep it realistic! Be honest about expectations and goals Use the SBA website Give yourself a reasonable timeline to develop the business plan and goals

Elements of a Business Plan Executive Summary – 1 paged summary of the proposal for the business that introduces your proposed business venture and helps familiarize the reader with your concept Description of Business, Product, or Service – explains the products or services your business will provide Management Team – explains personnel needs (staffing), qualifications for management, and an organizational chart (of who reports to who)

Customer Profile – analysis of and information about the target market (who you want as your customers) Competitive Analysis – information about direct and indirect competitors, their product and service offerings, and their pricing policies Marketing Plan – information about how the business will be marketed and promoted, pricing policies, and proposed promotional policies Operations Plan – how the business will operate, the type of ownership, and the location of the business

Financial Projections – the amount of money necessary to start and operate the proposed business Personal financial report – your personal financial status and personal assets and liabilities Pro Forma income statements – monthly income states that provide information about sales, expenses, profit, or loss Pro Forma cash flow statements – monthly statements about when cash is coming in and leaving throughout the month Pro Forma balance sheet – assets, liabilities, and owner’s equity Proposed sources of funding – personal and outside sources of funding, short- and long-term notes Short-term – paid off within one year Long-term – paid off within one to five years

Creating a Professional Business Plan Use proper grammar and spelling Incorrect grammar and misspelled words show a lack of attention to details Use standard fonts (Arial, TNR) Use business terms Keep it clean and simple in formatting

Key Math Concepts Net Worth = Assets – Liabilities Forecasted Revenue = % increase or decrease X Industry Ave. of Rev. Revenue = Unit Sales X Price per Unit Net Sales = Total Sales – (Returns and Discounts) Net Profit = Total Revenue – Total Expenses Equity = Assets - Liabilities